Thu. Jul 25th, 2024
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It’s no secret that PEOs have been on the rise in recent years. In fact, PEOs have seen a compound annual growth rate of 7.6% over the past five years1. This is significantly higher than the 2.9% growth rate for all other businesses during that same time period2. And according to PEO industry experts, this trend is only likely to continue in 2022 and beyond.

There are a number of factors driving PEO growth. Firstly, PEOs provide a number of key services that businesses find increasingly valuable, such as HR support, payroll processing, and employee benefits administration. Secondly, PEOs are able to help businesses save money by pooling resources and negotiating better rates with service providers. Finally, PEOs offer businesses a more flexible workforce solution that can be adapted to changing economic conditions.

All of these factors are expected to continue to drive PEO growth in the coming years. In fact, PEO industry experts predict that the PEO industry will grow by double digits in 2022, with some estimates as high as 15%3. This would represent a significant acceleration from the recent 5-year compound annual growth rate of 7.6%.

PEOs are well-positioned to continue this rapid growth in the coming years. Businesses of all sizes are increasingly recognizing the value of outsourcing key HR functions, and PEOs are able to provide significant cost savings and flexibility compared to traditional workforce solutions. As the economy continues to recover from the pandemic, PEOs are expected to continue to be a key driver of employment growth.

As PEOs continue to grow in popularity, businesses are beginning to see the value in outsourcing their HR functions. PEOs provide a number of key services that businesses find increasingly valuable, such as HR support, payroll processing, and employee benefits administration. PEOs are also able to help businesses save money by pooling resources and negotiating better rates with service providers. Finally, PEOs offer businesses a more flexible workforce solution that can be adapted to changing economic conditions.

All of these factors are expected to continue to drive PEO growth in the coming years. In fact, PEO industry experts predict that the PEO industry will grow by double digits in 2022, with some estimates as high as 15%3.

The new report also provides new definitive measures of the current size, scope, and footprint of the PEO industry, using an updated methodology. Data through the end of 2020 shows:

  • There are 487 PEOs in the United States.
  • PEOs employ 4 million worksite employees (WSEs).
  • Annual wages in the PEO industry are $216 billion.
  • 173,000 businesses partner with a PEO.

With these new figures, PEOs are clearly one of the fastest-growing industries in the country. And experts expect that trend to continue well into the future, as businesses increasingly recognize the value of PEO services and PEOs continue to provide innovative solutions for managing today’s dynamic workforce. As PEOs continue to grow in popularity, it will be interesting to see how this impacts employment growth in other industries and across the broader economy.

The economic analysis presented here suggests that PEO growth is likely to continue well into 2022 and beyond. Factors such as PEO cost savings, flexibility, and increased demand for HR support are driving robust growth within the PEO industry. And with 173,000 businesses already partnering with a PEO, PEOs are clearly well-positioned to help businesses meet their growing employment needs in the years to come. As PEOs continue to develop new solutions for managing today’s increasingly complex workforce landscape, we can expect PEO growth to remain a key driver of overall economic growth in the years ahead.

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